UBS LOOKS TO REDO GRAND UNION'S BOARD

DAVID GHITELMAN

WAYNE, N.J. -- A Swiss-based financial institution that provided some of the money that helped Grand Union Co. here emerge from bankruptcy last year is now looking to reconfigure the supermarket company's board of directors with a goal of having the company pursue a merger or sale more aggressively.

UBS AG, Zurich, Switzerland, which owns 8.1% of Grand Union stock, has filed a Schedule 13D with the Securities and Exchange Commission that says the Swiss bank is seeking consent agreements from Grand Union's other stocker-holders to remove five members of the company's current board and replace them with its own three candidates, including Herb Seif, a UBS managing director.

The bank said in the SEC filing it was "undertaking the consent solicitation because it is displeased with the performance of the company and its common stock."

Grand Union's stock, which has ranged from $8 7/8 to $14 in the last year, was trading at $9 7/8 at close last Thursday.

UBS said its goal was "to facilitate the immediate consideration and pursuit of alternatives to enhance shareholder value, including a sale or merger of the company," according to the filing.

The bank has 60 days from Dec. 3, when it filed the Schedule 13d, to obtain consent from a majority of Grand Union's shareholders.

In June 1998, when Grand Union filed for its second bankruptcy reorganization in 10 years, UBS was one of two financial institutions that assembled the $300 million credit facility that enabled Grand Union to emerge from Chapter 11 two months later.

In a printed statement, J. Wayne Harris, Grand Union's chairman and chief executive officer, said, "Clearly, our board has played an active and important role in helping Grand Union overcome its past problems and aggressively move forward with its rebuilding program."

Both Grand Union and UBS declined to comment beyond their formal statements.

Meredith Adler, equity analyst, Lehman Bros., New York, told SN, "I know there are unhappy investors, but Grand Union is one of the best-performing stocks in the [food retailing] group this year."

However, she noted that although Grand Union may lead in terms of performance it continues to trail in terms of reputation on Wall Street. "The stock market may be all wrong, but, at the valuations we see now, selling Grand Union is not going to get anyone a lot of money," she said.

She added if an attempt were made to sell the company now, a buyer might not be found at all. "The worst thing that could happen would be to have a failed auction. That's a taint that doesn't go away."

Another industry analyst, who requested anonymity, stressed the need for Grand Union's investors to exercise patience. "Harris and his management team have created a corporate culture that is consistently focused on giving customers what they want at a fair price and making cost reduction a way of life," he said.

He added that the time when Grand Union would be an attractive takeover target was "not that far off, possibly before the end of 2000."